money supply. In fact, Schwartz and Friedman are willing to consider as money allmarketable government securities, which are supported at par. By the same logic, there isno reason why the liabilities of saving institutions should not also be included in money.The debatable question is whether the measure of money should be extended to includeother deposits liabilities of the commercial banks, e.g., time deposits in USA and depositaccounts in the UK. Some investigators go further and include the liabilities of someother deposits taking institutions, such as savings and loan associations in the USA andsaving banks in Britain, on the grounds that their fixed monetary value makes them goodsubstitutes for interest bearing bank deposits. It has therefore, to be observed that variousmeasures of money supply keep on changing from country to country and from time totime within the country.
12.3RBI Classification of Money:
The Reserve Bank of India does not follow or clearly states any theory of money supplyor money stock. It simply publishes a purely accounting analysis of what it calls sourcesof change in money supply stock. The main constituents of money stock are a) currencywith the public b) Deposit money. These can be further split into what may be calledsources of money stock (a) Net Bank Credit to Government Sector (including RBI creditto Government Sector) (b) Bank credit to commercial sector. (c) Net foreign exchangeassets of banking sector (d) Governments currency liabilities to the public minus (e)Banking sectors net non-monetary liabilities.Up to 1968, the Reserve Bank of India published a single measure of money supplycalled M and latter on M
defined as currency and demand deposits held by public. It wascalled the narrow measure of money supply. After 1968 the RBI started publishing broader measure of money supply called aggregate monetary reserves defined as M or M
plus the net time deposits of banks by the public (M